The economy enters the long-run once
A) nominal wages become equal to real wages.
B) real wages become equal to nominal wages.
C) suﬃcient time has elapsed for wage contracts to expire and nominal wages to adjust to output-price changes.
D) suﬃcient time has elapsed for real GDP to increase and unemployment to decrease as a consequence

Question

Quizplus · Accepted Answer

In the long-run, nominal wages adjust to changes in output prices, and this adjustment takes time. The economy enters the long-run once sufficient time has elapsed for wage contracts to expire and nominal wages to adjust to output-price changes, resulting in real wages becoming equal to nominal wages.

The Economy Enters the Long-Run Once